Scandal-Plagued Analyst Contest Halted as China Cracks Down

(Bloomberg) -- Chinese regulators finally lost their patience with the shenanigans surrounding the country’s biggest competition for research analysts.

Days after video of staff from one brokerage raucously partying with a client went viral, 30 securities firms responded to pressure from authorities to pull out of the country’s New Fortune rankings, people with knowledge of the matter said. Shortly after, New Fortune said on its official Weibo account that this year’s contest has been suspended.

Brokerages including Guotai Junan Securities Co. and Haitong Securities Co. pulled out to “protect the reputation and credibility” of the industry, the Securities Association of China said in a statement on Friday, which cited “negative public opinion and unfair competitive behavior in the current selection process, which has affected the seriousness, fairness and professionalism of the rankings.”

The crackdown on the New Fortune ranking, a hyper-competitive version of the Institutional Investor research poll that started in 2003, is the latest sign of China’s determination to stamp out unsavory behavior in the financial industry. The China Securities Regulatory Commission has levied billions of yuan in fines for market manipulation over the past year and arrested executives for corruption and economic crimes.

The CSRC didn’t immediately respond to a fax seeking comment.

Friday’s exodus from the New Fortune contest comes after Founder Securities Co., a Chinese partner of Credit Suisse Group AG, suspended two analysts on Tuesday, citing the video and photos that brought “severe damage” to the firm’s reputation. The video reveals brief flashes of what appeared to be a raucous dinner party. A man and a woman appeared to hug and kiss while a couple of men raised their shirts to expose their torsos.

New Fortune’s contest has suffered several scandals in recent years related to bribes and other misbehavior. Compensation levels at many Chinese brokerages are tied directly to the rankings, and the impact of winning a top spot can be massive. While run-of-the-mill analysts with five years of experience earn the equivalent of about $75,000 a year in China, someone who appears on the list can take home $1 million or more.

New Fortune had tried to rein in the excesses, issuing a sharp reminder about behavior this year and calling for an independent and honest contest. More than 1,500 analysts from 43 brokerages had been slated to take part in this year’s competition, and about 1,600 global and domestic institutional investors managing 70 trillion yuan ($10 trillion) were set to vote from Sept. 18 through Sept. 27.

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